Intraday Market Update, Thursday, 12/12/2002 09:00:00 AM ET

Economic data has futures edging higher

by Jeff Bailey

This morning's economic data has stock futures edging higher, as
November retail sales were slightly better than expected and
helped offset a jobless claims number that came in above economist's
forecast.

Retail sales rose at the fastest pace in three months in
November, rising 0.4%, which was in line with economists
forecast. Auto sales fell -0.1%, the second straight monthly
decline. The upside to economists forecast came from the ex-
autos as sales rose 0.5%, which was better than the 0.2%
forecasted by economists. Sales at furniture and hardware stores
were strong, while sales at traditional mall-type stores such as
department stores and clothing stores fell. Catalog and online
retail sales showed gains.

Retail sales account for a third of the U.S.'s gross domestic
product and continues to show that consumer spending is the main
engine of growth in the economy the past two years as capital
spending by corporations remains weak.

In a separate report, the Labor Department said jobless claims
rose in the most recent week. The four-week moving average for
first-time claims rose by 10,000 to 387,250. Claims in the most
recent week rose 83,000 to 441,000, likely due to quirks in the
seasonal adjustment patterns around the holidays. Economists
were looking for the weekly jobless claim to rise by 378,000.

In a separate report, the Commerce Department said the nation's
current account deficit fell to $127 billion in the third quarter
from a record $127.6 billion in the second quarter.

Foreigners slowed their purchases of U.S. stocks and bonds during
the quarter, while Americans reduced their holdings of foreign
securities by $18.3 billion.

Foreigners bought $46.6 billion in American securities after an
increase of $104.4 billion in the second quarter. Foreigners
sold $5.1 billion in Treasuries and increased holdings of
equities by $7.4 billion. Foreign direct investment increased
$11 billion after falling $2.7 billion.

Also, the Labor Department reported import prices fell 1% in
November as petroleum prices fell 10%. Excluding oil, import
prices were up 0.1%. Export prices rose 0.1%, the eighth
increase in the past nine months, which is potentially good news
for U.S. producers.

Shares of Tenet Healthcare (NYSE:THC) $17.30 are trading higher
at $17.85 in pre-market action after the recently troubled
healthcare services provider announced lat night that its board
OK'd the repurchase of up to 30 million shares of the company's
common stock. This would represent a buyback of approximately
6.1% of the company's 487.7 million outstanding shares.

Consumer products giant Procter & Gamble (NYSE:PG) $87.46 are
gaining $1.14 at $88.60 over the New York ECNs after the company
raised its second-quarter profit outlook last night, citing
strength in its healthcare unit and developing markets, as its
past restructuring begins to gain traction.

The maker of Tide laundry detergent, Pringles chips and Pampers
diapers said it sees a percentage rise in earnings per share
before one-time items in the high-single digits from a year ago,
which is up from its previous forecast for growth in the mid-to-
high single digits. The average estimate among analysts had
targeted a profit of $1.10 per share, which compares to the year-
ago reported earnings of $1.03 per share. Last night's guidance
has PG looking for EPS in the $1.11 to $1.12 range for the
quarter.

From previous bearish profile near $87 and PG's triple-bottom
sell signal, traders can either continue to hold short the stock
with previously profiled stop of $90, or move to the sidelines on
last night's raised guidance, which would be 1 to 2-cents above
consensus estimates.

A STOCK trader holding PG short, might also contemplate the
selling of a December $90 put. While I'm writing this Wednesday
evening, I'm not certain what the premium would be, but the
selling of 1 $90 put (OBLIGATES the seller of the put to buy 100
shares at $90, less the option premium received), might give the
trader some time to reassess their holding, while raising their
cost basis in the short by the premium received. Then, should
the stock trade your stop of $90.25, the put may then be bought
back at lower cost than sold, while the trader also closes out
the bearish PG short at earlier defined stop. The "best case"
scenario is that PG closed at $90.01 next Friday (option
expiration) entire put premium is kept, then PG reverses lower
with trader still holding short and higher short cost basis in
stock.

Oil services company Halliburton (NYSE:HAL) $20.40 are gaining
$1.50 in the pre-market after Bloomberg reported that the company
agreed to settle their asbestos lawsuits for as much as $4.2
billion, according to the worker's lawyers.

In yesterday's market monitor at OptionInvestor.com we made note
that shares of Dow component Honeywell (NYSE:HON) $25.09 saw some
upside price action intra-day after Dow Jones reported that it
too may be nearing a deal in its asbestos suits.

After being halted for trading in last night's extended hours
session, Ballard Power Systems (NASDAQ:BLDP) $14.21 fell to
$13.06 when the trading halt was lifted. The company said it had
entered into an agreement with underwriters led by RBC Capital
Markets and CIBC World Markets for issuance of 7.7 million common
shares at a price of $13.02 per common share for total gross
proceeds of approximately $100.2 million.

I will make note here for any subscribers holding BLDP short/put,
to think about locking in gains on the gap lower. The $13.02
pricing level is right on upward trend and I've noted in recent
weeks that a secondary offering in Duke Energy (NYSE:DUK) $19.35
has found formidable support in recent weeks above the $18.35
level where it placed a secondary offering of 52 million shares.
While BLDP and DUK are both different companies with what appear
to be different problems, the reason for this note regarding the
secondary offering is that the investment bankers underwriting
these deals have vested interest in keeping the stocks at/near or
above the secondary offering prices. The reason for this is that
the underwriters can then be better able to solicit similar
investment banking deals with other clients and show that they
can support larger underwritings and garnish fees for such
services.

I would NOT use the above observations as "reason" to trade
bullish in any stock where a secondary offering is placed, simply
on the belief that there will be "artificial" support provided by
the underwriters. However, I might use the observations from
past as "reason" for a shorter-term trader to move to the
sidelines. Then, if still bearish, look for the stock to
DISCOUNT the secondary offering on HEAVY volume, which might hint
that those institutional investors that took the deal, "learn"
something that threatens there investment and begin dumping the
stock at such a rate that the investment banking firm can no
longer support the underwriting as supply exceeds the
underwriter's risk tolerance and broader market demand.

All of the above and undoubtedly more finds S&P futures (sp02z)
trading higher by 4.2 points at 906.40. NASDAQ futures are
gaining 15 points at 1,050.50, while Dow futures (dj02z) are up
29 points at 8,599.

Fair value for the S&P 500 today is $0.00. HL Camp & Company has
their computers set for program buying at $0.26 and set for
program selling at $-2.32. Fair value for the NASDAQ-100 today
is $5.00.

Treasuries are seeing modest selling this morning. Per last
night's Index Trader's Wrap at OptionInvestor.com, the benchmark
10-year YIELD ($TNX.X) is edging higher with YIELD currently at
4.035%.